History suggests the FTSE's Greek rally will run out of steam

The FTSE's rally today has come as little surprise to most market watchers - after all expectations around the eurozone rescue summit were low.

The FTSE 100 is up 162 points, or 2.9%, at 5715, after the outlines of a plan to solve the European sovereign debt crisis emerged overnight. And yet already, the analysts are saying that without more detail from the European leaders who bashed out the deal, the rally could soon run out of steam.

It feels like most of the announcements on plans to rescue Greece and the wider euro zone have been followed by short-lived rallies: a spike in stock markets in the immediate aftermath and then a sell-off as caution sets in over the next day or so. To check whether this was just a feeling or indeed a pattern, we went through a few events and tracked FTSE moves in the following days.

In a by no means exhaustive look at news on Greece and the eurozone, four of the five FTSE rallies below were followed by a sell-off on the very next day or a day later (in one case).

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers concurs that such a pattern can often be seen in stock markets but he believes this time the market may be sending a slightly more confident signal.

There are still going to be implementation issues, the timing is not clear, the figures are not clear. But nonetheless if you ask if we are in a better position then yesterday you have to say 'yes'... There have been 14 meetings in the last 19 months so expectations were quite low but we are starting to see some evidence that this is now being taken pretty seriously by euro leaders.

The acid test of how much confidence the market really has will be whether the rally extends tomorrow, he adds.

But to keep today's 162 point rally in context, Hunter notes the FTSE 100 is still down 200 points from the start of this year. When the eurozone news dies down, other risks will come into play, he predicts.

There's the US debt situation in the longer-term. It is the world's biggest economy and until such time as it can show it's on a stable footing as regards economic recovery that will dampen markets generally.

If you'd like to use our rough and ready analysis to draw your own conclusions about where the market is headed next, here is a summary of FTSE moves in the wake of some of the bigger Greek headlines: